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COMMENT
COMMENT
October 9, 2018

Trading has been halted for a week or two because of rumours of a reverse takeover. Trading has been halted by the London Stock Exchange until SDX either does the deal or does not. He has no information about the takeover. He still likes the company because it is significantly increasing production from discoveries already made, in line with expectations it has set at conferences. All the things they’ve talked about, from an operational point of view, are happening. He thinks the stock is cheap and he assigns a $2 target to it. But valuation might change with the details of the deal.

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SDX Energy Inc. (SDX-LN)
October 9, 2018

Trading has been halted for a week or two because of rumours of a reverse takeover. Trading has been halted by the London Stock Exchange until SDX either does the deal or does not. He has no information about the takeover. He still likes the company because it is significantly increasing production from discoveries already made, in line with expectations it has set at conferences. All the things they’ve talked about, from an operational point of view, are happening. He thinks the stock is cheap and he assigns a $2 target to it. But valuation might change with the details of the deal.

COMMENT
COMMENT
October 9, 2018

Has recently gone to a dividend model. They are giving investors 16 cents for last year and 0.125 monthly rate this year, which works out to about a 5% dividend yield. They produce about 5000 boe per day. They have very low decline rates. He likes the management team. They are among the few companies that have done very well this year. There is a liquidity issue because this is a very small cap company. This is one of the names on his coverage list. Yield 5%.

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Has recently gone to a dividend model. They are giving investors 16 cents for last year and 0.125 monthly rate this year, which works out to about a 5% dividend yield. They produce about 5000 boe per day. They have very low decline rates. He likes the management team. They are among the few companies that have done very well this year. There is a liquidity issue because this is a very small cap company. This is one of the names on his coverage list. Yield 5%.

BUY
BUY
October 9, 2018

The caller asked him to speak to Blackbird’s recent financial report. He is a big fan of the company. It is in one of the most liquid-rich areas of the basin (Montney fairway); it has a massive land spread and is bringing on production in Q2 of 2019 with a new facility with Tidewater Midstream (TWM-T) that will increase volumes to 8000 boe per day. These are about 50% liquids, so this company’s cash flow will start booming by Q2 2019. Net asset values have gone up significantly. He has a 12-month target of $0.70 and expects the price to rise further after Q2.

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The caller asked him to speak to Blackbird’s recent financial report. He is a big fan of the company. It is in one of the most liquid-rich areas of the basin (Montney fairway); it has a massive land spread and is bringing on production in Q2 of 2019 with a new facility with Tidewater Midstream (TWM-T) that will increase volumes to 8000 boe per day. These are about 50% liquids, so this company’s cash flow will start booming by Q2 2019. Net asset values have gone up significantly. He has a 12-month target of $0.70 and expects the price to rise further after Q2.

BUY
BUY
October 9, 2018

This is a liquids-rich player in the Permian basin and in the Canadian Montney. They just announced sale of their San Juan assets for $400 million US dollars. Their debt at the end of Q2 was $4 billion, so this helps them knock that down significantly. The company is growing its production in its core areas, both in Canada and the US. Institutional investors like this stock a lot. They are using their land much more efficiently than is typical. Rather than drilling 8 wells per pad, they can drill at multiple levels and take oil from 50 wells per pad. The company also uses walking rigs to make all this drilling more efficient. This is a name that investors want to own for the long term.

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Encana Corp (ECA-T)
October 9, 2018

This is a liquids-rich player in the Permian basin and in the Canadian Montney. They just announced sale of their San Juan assets for $400 million US dollars. Their debt at the end of Q2 was $4 billion, so this helps them knock that down significantly. The company is growing its production in its core areas, both in Canada and the US. Institutional investors like this stock a lot. They are using their land much more efficiently than is typical. Rather than drilling 8 wells per pad, they can drill at multiple levels and take oil from 50 wells per pad. The company also uses walking rigs to make all this drilling more efficient. This is a name that investors want to own for the long term.

BUY
BUY
October 9, 2018

The company is very cheap in terms of price to book. Their book value was $4 at the end of June. However, they have a debt problem: $211 million of debt compared to an equity value of $369 million. He sees this as a takeover candidate especially now because he is seeing consolidation in the rig industry. When the industry turns around, this company will be very profitable. Utilizations rates go from 20% to 70% or 80% and much of the increased cash is profit. In addition, when rigs are busy, rig suppliers have pricing power. So, there can be an increase of 10x in profitability.

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The company is very cheap in terms of price to book. Their book value was $4 at the end of June. However, they have a debt problem: $211 million of debt compared to an equity value of $369 million. He sees this as a takeover candidate especially now because he is seeing consolidation in the rig industry. When the industry turns around, this company will be very profitable. Utilizations rates go from 20% to 70% or 80% and much of the increased cash is profit. In addition, when rigs are busy, rig suppliers have pricing power. So, there can be an increase of 10x in profitability.

BUY
BUY
October 9, 2018

Schachter has liked this company for a long time. The company is in the midst of an acquisition ($320 million) that will add significantly to its production. The dividend will increase if the acquisition goes through. He has a $3.70 12-month target and an $8.70 target for the cycle (2023). Yield is 5%.

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Surge Energy Inc (SGY-T)
October 9, 2018

Schachter has liked this company for a long time. The company is in the midst of an acquisition ($320 million) that will add significantly to its production. The dividend will increase if the acquisition goes through. He has a $3.70 12-month target and an $8.70 target for the cycle (2023). Yield is 5%.

WAIT
WAIT
October 9, 2018

Likes it a lot. He is still waiting to add it to his action alert list. Its metrics are excellent but tax loss season is coming and the price will come down. The company has been buying its stock back aggressively, at an average price of $3.47. The price keeps going down and the company has slowed down its buyback. With tax loss selling, he thinks the price could drop below $2. He would buy it himself for that price. He sees this as a $3.70 stock in late 2019 and an $8.50 stock 5 years later. It was $20 in 2014

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Likes it a lot. He is still waiting to add it to his action alert list. Its metrics are excellent but tax loss season is coming and the price will come down. The company has been buying its stock back aggressively, at an average price of $3.47. The price keeps going down and the company has slowed down its buyback. With tax loss selling, he thinks the price could drop below $2. He would buy it himself for that price. He sees this as a $3.70 stock in late 2019 and an $8.50 stock 5 years later. It was $20 in 2014